Late on Monday, the Trump administration decided that now is the moment to ratchet up a longstanding trade dispute between Boeing and Airbus. The US is threatening to impose $11bn of punitive tariffs on a range of European products from aircraft to cheese.
The dispute is unrelated to the crash of two Boeing 737 Max aircraft – but the world of commercial aviation is in turmoil, and such a move looks particularly bad right now. It risks looking like a bully lashing out under pressure.
Boeing’s dispute with Airbus at the World Trade Organization dates back years. Each accuses the other of benefiting from unfair subsidies. The details are complex, and neither side is blameless. After all, establishing a competitive commercial aerospace industry is difficult without some form of government support.
The two sides should have moved on long ago, but still can’t. The US seems unable to forgive Airbus for breaking its dominance of large commercial aircraft production – each now has about 50% of the market.
US President Donald Trump appears to loathe the WTO, until it is useful to him. By making threats just as the European economy shows signs of weakening, he doubtless intends to make a show of strength. He seems to believe international governments can be browbeaten into making trade concessions that he can then celebrate as a “win.”
Germany’s car exports are in no way a threat to US national security, but claiming otherwise makes for a useful negotiating tactic. Similarly, part of the administration’s beef with Airbus relates to development loans that European governments provided for the A380 superjumbo, a plane that has now been scrapped due to a lack of orders.
An unwise, distasteful move
On Monday, Airbus shares had hit a record high amid expectations that the plane maker could gain some advantage from the 737 Max’s prolonged grounding (though the European company has been at pains to emphasize it won’t try to capitalize on the tragedy.) On Tuesday, the stock dipped only slightly on the news of possible tariffs – because if the US did take punitive action, Europe would be all but certain to retaliate and hurt Boeing.
It looks unwise for the US to step up a commercial dispute when its domestic aerospace champion is reeling and reliant on the goodwill of aviation authorities around the world to help get the 737 Max flying again. Distrust is already running high, with the Federal Aviation Administration facing questions about its rigor in approving the jet and why it took so long to ground the plane.
In view of the lives lost in the twin Boeing tragedies, and the importance of understanding what went wrong, talking about aerospace trade disputes feels distasteful. But, in such circumstances, it would be remiss not to mention one thing.
Back in 2011, when Airbus began winning a string of orders for its new fuel-efficient single aisle jet, the A320neo, Boeing scrambled to launch a product that would help it fight back. It now turns out that plane, the 737 Max, was unsafe. With Boeing’s top-selling jet grounded for the foreseeable future, perhaps it is fortunate commercial aviation didn’t end up a monopoly.